Sri. Zacharia T.M., Alappuzha V. The ITO, Alappuzha

ITA 354/COCH/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7312 (ITAT-COCHIN)
• Duration Of Justice: 5 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2017
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Next Hearing Date: 07-02-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 18-08-2016
• Court: TRIBUNAL
• Department Lawyers: A DHANARAJ
• Assessee Lawyers: R KRISHNAN
• Keywords: Unexplained investment; Reason to believe
• Section: 143(3); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI GEORGE GEORGE K., JUDICIAL MEMBER I.T.A. NO. 354 /COCH/ 201 6 ASSESSMENT YEAR : 2008 - 09 SHRI ZACHARIA T.M., REGAL TEA & COFFEE, NR. STONE BRIDGE, ALAPPUZHA. [PAN: ADHPM 1921H] VS. THE INCOME TAX OFFICER, WARD - 3, ALAPPUZHA. (ASSESSEE - APPELLANT) (REVENUE - RESPONDENT) ASSESSEE BY SHRI R. KRISHNAN, CA REVENUE BY SHRI A. DHANARAJ, SR. DR DATE OF HEARING 08 / 0 2 / 201 7 DATE OF PRONOUNCEMENT 08 / 0 2 /201 7 O R D E R PER GEORGE GEORGE K.,JUDICIAL MEMBER: THIS APPEAL AT THE INSTANCE OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A), KOTTAYAM DATED 21/06/2016. THE RELEVANT AS SESSMENT YEAR IS 2008-09. I.T.A. NO.354/COCH/2016 2 2. THE GROUNDS RAISED READ AS FOLLOWS: 1) THE REOPENING OF THE ASSESSMENT IS BAD IN LAW. THE INGREDIENTS OF SECTION 147 ARE NOT SATISFIED IN THIS CASE, SO MUCH SO, THE CONSEQUENTIAL ASSESSMENT MADE IS ALSO BAD IN LAW. 2) THE LEARNED CIT(A) ERRED IN UPHOLDING THE FINDI NG OF THE ASSESSING OFFICER TO THE EFFECT THAT APPELLANT HAD EARNED A G P RATIO OF 3% WITHOUT CONCRETE MATERIAL TO SUPPORT SUCH A FINDING. MERELY BECAUSE APPELLANT HAD OFFERED ADDITIONAL INCOME IN THE RETURN, THAT WILL NOT BE A GROUND FOR SUSTAINING HIGHER GROSS PROFIT RATIO. 3) THE LEARNED OFFICERS BELOW ERRED IN CONCLUDING THAT THE INVESTMENT IN THE BANK ACCOUNTS OF THE APPELLANTS SONS OF RS. 1. 8 LAKHS HAD COME OUT OF THE FUNDS OF THE APPELLANT. HE OUGHT TO HAVE APPRE CIATED THAT THE APPELLANTS SONS ARE MAJORS AND THERE WAS NOTHING A VAILABLE ON RECORD TO INDICATE THAT THE AMOUNTS HAD FLOWN OUT OF THE COFF ERS OF THE APPELLANT. 4) THE LEARNED CIT(A) ERRED IN SUSTAINING ADDITION OF RS.1,60,000/- BEING INVESTMENT IN COMMERCIAL BUILDING, OVERLOOKING THE EXPLANATION OF THE APPELLANT. NOT A WORD HAS BEEN WHISPERED, AS TO WH Y THE ADDITION IS SUSTAINABLE. THE ORDER OF THE CIT(A) IS ALSO SILEN T ON THE APPELLANTS CLAIM OF INCOME OFFERED IN THE EARLIER YEARS. 5) THE LEARNED CIT(A) ERRED IN SUSTAINING ADDITION OF RS.1,76,940/- IN RESPECT OF SHORTFALL IN DRAWINGS, OVERLOOKING THE A DDITIONAL INCOME OFFERED BY THE APPELLANT. NO REASONS HAVE BEEN STATED BY T HE CIT(A) IN THE ORDER NOR ANY FINDING HAS BEEN ENTERED INTO WITH REGARD T O ADEQUACY OF DRAWINGS. THE ADDITION IS BAD IN LAW. 3. WE SHALL ADJUDICATE THE GROUNDS AS UNDER: GROUND NO. 1 THE ASSESSING OFFICER WHILE RE-OPENING THE ASSES SMENT HAD RECORDED THE FOLLOWING REASONS: I.T.A. NO.354/COCH/2016 3 THERE ARE CREDITS OF RS.15,000 (BY CASH) ON 15-5-0 7) , RS. 4 LAKHS (BY BANK ON 17-12-07) AND RS.3390/- (BY BANK ON 3-1-08) IN HIS CAPITAL ACCOUNT IN THE BOOKS OF M/S. REGAL TEA & COFFEE. THE SOURCES FOR THESE CREDITS ARE NOT EXPLAINED. FURTHER, THE ASSESSEE WAS CONSTRUCTING A MULTISTORI ED COMMERCIAL BUILDING TO THE NORTH OF PITCHU IYER JN. DURING THE AY 07-08. HOWEV ER, NO INVESTMENT IN THE CONSTRUCTION HAS BEEN REFLECTED IN THE RETURN OR TH E SUPPORTING ACCOUNTS. HENCE, I HAVE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SEC. 147. ISSUE NOTICE U/S. 147. 3.1 IN THE INSTANT CASE, ADMITTEDLY, THERE WAS NO SCRUTINY ASSESSMENT DONE U/S. 143(3) OF THE ACT PRIOR TO COMPLETION OF RE-ASSESSM ENT U/S. 147 OF THE ACT. THEREFORE, THE PROVISO UNDER SECTION 147 DOES NOT H AVE APPLICATION TO THE FACTS OF THE CASE. MOREOVER I NOTICE THAT THE ISSUE OF VA LIDITY OF RE-ASSESSMENT WAS NEITHER RAISED BEFORE THE ASSESSING OFFICER NOR BEF ORE THE CIT(A). FOR THE AFORESAID REASONS, I AM OF THE VIEW THAT THIS GROUN D IS WITHOUT ANY JUSTIFICATION AND THE SAME IS REJECTED. IT IS ORDERED ACCORDINGL Y. GROUND NO. 2 4. THE ASSESSING OFFICER HAS NOT MADE ANY ADDITI ON ON THE G.P. RATIO. THE ASSESSING OFFICER HAS DISCUSSED THE G.P. ONLY TO HI GHLIGHT THE FACT THAT THE ASSESSEE IS INDULGING IN SUPPRESSION OF INCOME AND UTILIZING THE SAME FOR INVESTMENTS. THE ASSESSING OFFICER HAS MADE THE A DDITION OF RS. 6 LAKHS TO THE RETURNED INCOME BASED ON THE INVESTMENT IN THE BANK ACCOUNT OF THE ASSESSEES SON, INVESTMENT IN COMMERCIAL BUILDING AND ADDITION ON ACCOUNT OF SHORT DRAWINGS. NO SPECIFIC ADDITION WAS MADE BY THE ASSE SSING OFFICER WITH REGARD TO LOW G.P. THEREFORE, THIS GROUND RAISED BY THE ASSE SSEE IS DISMISSED. IT IS ORDERED ACCORDINGLY. I.T.A. NO.354/COCH/2016 4 GROUND NO. 3 5. THE ASSESSING OFFICER HAS MADE THE ADDITION OF RS.1,80,000/- BY OBSERVING AS UNDER: 4.1 WHILE VERIFYING HIS BANK ACCOUNTS, AN SB ACCOU NT IS SEEN MAINTAINED BY THE ASSESSEE IN HIS SONS (SHRI RICHU ZACHARIAH) NAME A T ICICI BANK. THE SAID ACCOUNT SHOWED SHARE TRANSACTIONS OF RS.3,53,500/- IN ADDIT ION TO A CASH DEPOSIT OF RS.1,30,000/- ON 23.01.2008. AS SRI RICHU ZACHARI A IS NOT AN ASSESSEE, THE ASSESSEE WAS ASKED TO EXPLAIN THE SOURCE FOR THE ABOVE. THE ASSESSEE EXPLAINED THE SOURCE AS UNDER: SONS OWN MONEY (SRI RICHU ZACHARIA) RS.1,30,000 MATURITY PROCEEDS OF SBI MUTUAL FUND RS. 50,000 RECEIVED FROM SRI JITHU ZACHARIA (ASSESSEE S YOUNGER SON) RS. 50,000 RECEIVED FROM SRI TIJO PUNNOOSE RS.2,99,300 SHARE MONEY RECEIVED BACK RS. 87,080 SHRI RICHU ZACHARIA HAS NOT FILED HIS RETURN OF INCOME SO FAR. FURTHER DURING THE RELEVANT PERIOD HIS SECOND SON SHRI JITHU ZACHARIA WAS NOT EMPLOYED. THEREFORE, THE ASSESSEES EXPLANATIONS THAT THE INVESTMENTS/TRANSA CTIONS WERE MADE BY HIS SONS, SRI RICHU ZACHARIA RS.1,30,000/- AND SRI JITHU ZACHAR IA RS.50,000 ARE NOT CONVINCING. THEREFORE IT CAN BE CONCLUDED THAT THE ASSESSEE HIM SELF HAS DONE THESE INVESTMENTS AND SHARE TRANSACTIONS. ACCORDINGLY, SOURCE FOR RS .1,80,000/- STANDS UNEXPLAINED. 5.1 ON FURTHER APPEAL, THE ABOVE ADDITION WAS CON FIRMED BY THE CIT(A). AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRI BUNAL. 5.2 I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE MATERIAL ON RECORD. THE ASSESSING OFFICER HAS MADE THE ADDITION OF RS.1,30, 000/- BEING CASH DEPOSITS MADE IN ASSESSEES SONS BANK ACCOUNT. FURTHER, A SUM OF RS. 50,000/- CREDITED IN ASSESSEES SONS ACCOUNT ON 12/12/2007 WAS ALSO BROUGHT TO TAX IN ASSESSEES HAND. THE SAID AMOUNT WAS TRANSFERRED FROM THE SEC OND SONS BANK ACCOUNT. ADMITTEDLY, THE SB ACCOUNT IS MAINTAINED BY THE ASS ESSEES ELDEST SON WHO IS I.T.A. NO.354/COCH/2016 5 HAVING SHARE BUSINESS. THE ASSESSEES SON WAS A MAJ OR AT THE TIME OF ASSESSMENT AND HE HAD FILED A DECLARATION THAT THE CASH DEPOSIT WAS LOAN FROM HIS FRIENDS FOR HIS SHARE TRANSACTIONS. ADMITTEDL Y, THE ABOVE FACT WAS BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER. THE ASSESSEES SON HAS FILED A CONFIRMATION LETTER STATING THAT THE CASH DEPOSITS ARE MADE BY H IM IN HIS SAVING ACCOUNT OUT OF HIS OWN SOURCE/LOANS. THE ASSESSEES SON BEING A M AJOR, THE CASH DEPOSITS IN HIS BANK ACCOUNT CANNOT BE SAID TO BE DEPOSITS MADE BY THE ASSESSEE. THE REVENUE COULD HAVE ASKED FOR FURTHER PROOF FROM THE ASSESSE ES SON BEFORE MAKING THE ADDITION IN THE HANDS OF THE ASSESSEE, ESPECIALLY W HEN THE SON OF THE ASSESSEE WAS A MAJOR AT THE TIME OF THE ASSESSMENT. FURTHER , THE ADDITION OF RS.50,000/- IS THE BANK TRANSFER FROM THE OTHER SON OF THE ASSE SSEE WHO IS ALSO A MAJOR. THEREFORE, THE TWO ADDITIONS AGGREGATING TO RS.1,80 ,000/- CANNOT BE MADE IN THE HANDS OF THE ASSESSEE AND I DELETE THE SAME. THEREF ORE, GROUND NO. 3 IS ALLOWED. IT IS ORDERED ACCORDINGLY. GROUND NO. 4 6. THE AMOUNT OF RS.1,60,000/- WAS ADDED AS INVEST MENT MADE IN THE CONSTRUCTION OF A COMMERCIAL BUILDING. THE OBSERVAT ION OF THE ASSESSING OFFICER FOR MAKING THE ADDITION READS AS UNDER: DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE H AS MADE INVESTMENT IN THE CONSTRUCTION OF A COMMERCIAL BUILDING. THE ASSESSE E HAS NOT INCLUDED THE SAID ASSET IN HIS BUSINESS ASSET. WHILE EXPLAINING THE SOURCE FOR THE INVESTMENT, THE ASSESSEE FILED A CASH FLOW STATEMENT WHICH SHOWED RS.1,60,00 0/- AS CASH AVAILABLE WITH HIM FROM HIS PAST SAVINGS. WHEN THE ASSESSEE WAS ASKED TO FILE THE EVIDENCE HE ARGUED I.T.A. NO.354/COCH/2016 6 THAT HE HAD GIVEN SMALL AMOUNTS TO SO MANY FRIENDS AND RELATIVES AS SMALL HAND LOANS AND HE RECEIVED IT BACK WHEN THE NECESSITY (C ONSTRUCTION PURPOSE) CAME. THE EXPLANATION IS NOT CONVINCING. IN THE OPENING CASH BALANCE, THE ASSESSEE HAS NOT SHOWN THIS AMOUNT. FURTHER IT IS HARD TO BELIEVE T HAT A BUSINESS MAN LIKE THE ASSESSEE KEPT SO MUCH CASH IN HIS POCKET WHEN HE MA INTAINED SO MANY BANK ACCOUNTS. HENCE, I TREAT RS.1,60,000/- AS UNEXPLAIN ED AND THE SAME REQUIRES ADDITION. 6.1 ON FURTHER APPEAL, THE ABOVE ADDITION WAS CO NFIRMED BY THE CIT(A). AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRI BUNAL. 6.2 I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE MATERIAL ON RECORD. THE ASSESSEE HAD OFFERED THE FOLLOWING ADDITIONAL I NCOME DURING VARIOUS ASSESSMENT YEARS WHICH ARE DETAILED BELOW: ASSESSMENT YEAR ADDITIONAL INCOME OFFERED (RS.) 1999 - 00 25000.00 2000 - 01 10000.00 2001 - 02 40000.00 2002 - 03 40000.00 2003 - 04 30000.00 2004 - 05 10000.00 2005 - 06 75000.00 2006 - 07 50000.00 2007 - 08 50000.00 IT WAS STATED BEFORE THE ASSESSING OFFICER THAT THE AMOUNTS OFFERED AS ADDITIONAL INCOME IN THE RETURNS FILED WERE AVAILABLE WITH THE ASSESSEE AND WERE GIVEN AS HAND LOANS TO HIS FRIENDS AND RELATIVES. AS AND WHE N THE FUNDS WERE REQUIRED, THE SAME WAS RECEIVED BACK FOR THE PURPOSE OF CONST RUCTION OF THE BUILDING. THERE IS NO DISPUTE THAT THE ASSESSEE OFFERED ADDIT IONAL INCOME IN THE PREVIOUS I.T.A. NO.354/COCH/2016 7 YEARS WHICH ARE DETAILED ABOVE. IT COULD HAVE BEEN GIVEN AS HAND LOANS TO THE FRIENDS AND RELATIVES AND AT THE TIME OF CONSTRUCTI ON OF THE BUILDING, THE SAME COULD HAVE BEEN RETURNED. SINCE THE ASSESSEE HAS O FFERED ADDITIONAL INCOME FOR THE PAST YEARS WHICH IS NOT IN DISPUTE, I AM OF THE VIEW THAT THE ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT IN THE CONSTRUCTI ON OF THE BUILDING TO THE TUNE OF RS.1,60,000/- IS NOT REQUIRED IN THE FACTS AND C IRCUMSTANCES OF THE INSTANT CASE. THEREFORE, GROUND NO. 4 IS ALLOWED. IT IS O RDERED ACCORDINGLY. GROUND NO. 5 7. THE ASSESSING OFFICER ESTIMATED THE HOUSEHOLD EXPENSES OF THE ASSESSEE AT RS.20,000/- PER MONTH. THE CASH WITHDRAWALS OF THE ASSESSEE BEING ONLY RS.63,060/-, THE DIFFERENCE AMOUNTING TO RS.1,76,94 0/-(RS.2,40,000- RS.63,060/- = RS.1,76,940/-) WAS ADDED FOR SHORT DR AWINGS FROM BANK ACCOUNT. 7.1 ON FURTHER APPEAL, THE CIT(A) CONFIRMED THE AD DITION MADE BY THE ASSESSING OFFICER. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFO RE THE TRIBUNAL. 7.2 I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL ON RECORD. LOOKING AT THE STATUS OF THE ASSESSEE, THE ESTIMATE FIXED BY THE ASSESSING OFFICER FOR HOUSEHOLD EXPENSES AT RS.20,000/- PER MONTH IS REASONABLE AND IN VIEW OF THE SHORT WITHDRAWALS, THE ADDITION MADE IS IN ORD ER AND THE SAME IS SUSTAINED. HENCE GROUND NO. 5 IS REJECTED. IT IS ORDERED ACCO RDINGLY. I.T.A. NO.354/COCH/2016 8 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 08-02-2017. SD/- (GEORGE GEORGE K.) JUDICIAL MEMBER PLACE: KOCHI DATED: 8 TH FEBRUARY, 2017 GJ COPY TO: 1.SHRI ZACHARIA T.M., REGAL TEA & COFFEE, NR. STONE BRIDGE, ALAPPUZHA. 2. THE INCOME TAX OFFICER, WARD-3, ALAPPUZHA. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS), KOTTAYA M. 4. THE PRINCIPAL COMMISSIONER OF INCOME-TAX, KOTTAY AM. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T. , COCHIN